Association for Public Policy Analysis & Management

The health care industry in the United States is experiencing consolidation at all parts of the system, including insurers, hospitals and health systems, and physician practices. This consolidation is a growing area of concern among regulators, policymakers, and consumers. While the effects of competition and consolidation on prices and premiums in health care markets are well known, how consolidation affects the behavior of health care providers is not well established. It is important to understand the extent to which consolidation influences the referral patterns of physicians. Referral networks are significant because physician referrals heavily influence the type, timing, quality, cost, and convenience of the care patients receive.

Using the SK&A physician dataset, we first describe the amounts and types of consolidation events that have occurred in the United States from 2008-2013 among physician practices. Outcomes include consolidation event rates by geographic market, specialty, and practice size. These types of consolidation events of interest include both vertical consolidation, such as practices becoming owned by hospitals or health systems, as well as horizontal consolidation, such as practices becoming affiliated with medical groups or independent practice associations, or otherwise merging with other physician practices.

We then use these results to assess the impact of consolidation events on observed physician referral patterns using the DocGraph dataset. We conduct two comparisons: a pre-post comparison among physician practices that experienced a consolidation event, and a comparison of physician practices that experienced a consolidation event to similar physician practices that did not. For the pre-post comparison, our key outcome is whether and how referral patterns systematically change after a consolidation event for physicians whose practices underwent a consolidation event. These systematic changes to the physician’s referral network include overall “widening” (the physician refers patients to a larger set of physicians than before) or “narrowing” (the physician refers patients to a smaller set of physicians than before). For the controlled comparison, we determine whether changes in referral networks are systematically different for physician practices that experienced a consolidation event and similar physician practices that did not. Again, we assess differences in these patterns by geographic market, specialty, practice size, and consolidation type.